Last night, Microsoft shared its earnings results for the quarter ending September 30th, 2026 (referred to as FY27 Q1), and as expected, it included a few declines for Xbox in terms of revenue.
Compared with the same period a year prior, Xbox was down 2% for content and services revenue, mostly attributed to third-party content and Xbox Game Pass. It’s said that “growth in first-party content” helped to offset the decline.
As for hardware, revenue was predictably down by 14%.
Xbox CEO Asha Sharma issued a statement about all of this last night, highlighting the many positives of the past quarter compared to the previous one, while also pointing out that hardware is constrained by supply issues.
“In Q1, XBOX revenue declined 2% YoY, compared with a 10% decline a quarter ago, while our accountability margin improved. Minecraft and WoW Forever set records, Call of Duty had its most acclaimed release in more than a decade, and our PC platform revenue grew double digits. Console sales remain constrained by supply, with more demand than consoles available. We’re working to get more consoles into players’ hands, including through our expanded refurbishment program. We’re making progress, with a lot more work ahead.”
“In Q1, XBOX revenue declined 2% YoY, compared with a 10% decline a quarter ago, while our accountability margin improved. Minecraft and WoW Forever set records, Call of Duty had its most acclaimed release in more than a decade, and our PC platform revenue grew double digits. Console sales remain constrained by supply, with more demand than consoles available. We’re working to get more consoles into players’ hands, including through our expanded refurbishment program. We’re making progress, with a lot more work ahead.”
As you can see, Sharma is still very encouraged by the progress that’s been made at Xbox recently, and the jump from a 10% content and services decline to a 2% decrease is certainly an encouraging indicator of that.
For what it’s worth, Microsoft CFO Amy Hood expects Xbox content and services revenue to grow by around 5-10% in the next quarter, while hardware will be down again. The former is a much bigger focus for the Xbox division overall though, so any success in that area will be seen as a significant positive.
These latest results are a bit doom-and-gloom on the face of it, then, but become much less concerning when you add extra context into the mix. There’s a “lot more work ahead” as Sharma says (particularly in the hardware space), but hopefully things are trending in the right direction for future growth.
What’s your takeaway here? Let us know down in the comments section below.
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